United Expects Demand To Remain Low Without A COVID Vaccine

In a statement forecasting its third-quarter financials, United Airlines has said it expects air travel to remain low until a COVID-19 vaccine or treatment is in circulation. The American airline says that while it has seen a spike in bookings in the past fortnight, the future looks bleak.

United 787-9
Without a vaccine, United thinks travel demand will be halved. Photo: Getty Images

Q3 2020 looks bleak for United Airlines

Forecasting financials during the pandemic is always a sobering task. Though a lot has changed since the peak of travel restrictions, airlines still find themselves hampered by low demand.

American carrier United Airlines said today that it is forecasting fewer scheduled services and more revenue losses as the end of the third quarter draws near. Its projections are based on 60-day rolling analyses of the situation and therefore offer an accurate prediction of how travel demand is set to shape up.

Looking at the months ahead, United has said that without a vaccine for COVID-19, travel demand this year could be just half of what it was in 2019.

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United Airlines parked at gate
Does a vaccine hold the key to getting the industry off the ground? Photo: Getty Images

According to a statement seen by Simple Flying, the carrier stated,

“[United Airlines] plans to continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand, and expects demand to remain suppressed and plateau at levels of around 50%, relative to 2019 levels, until a widely accepted treatment and/or vaccine for COVID-19 is widely available.”

Updating forecasts for the year ahead

Since United Airlines is keeping a close eye on coronavirus developments, it has recently adjusted its forecasts for the upcoming months. It has previously said that, in Q3, its scheduled capacity year-on-year would reduce by 65%. However, it has now adjusted that figure. It believes only 30% of the airlines’ scheduled flights will go-ahead by the end of the third quarter.

What’s more, it’s expecting its annual passenger revenue to decrease by 85% in comparison to 2019. That’s a decrease of 2% on what it has previously thought.

United Airlines take-off
United’s passenger revenue is expected to drop by 85%. Photo: Getty Images

That said, United remains confident that by the end of the quarter, it will retain $18bn in liquidity.

Coping with the cost of low demand

Having stable financials and good liquidity is essential at this time. Yet, despite its cutbacks, United still has a cash burn of $25m per day.

To cope with the cost, United Airlines has had to cut unnecessary spending and also take advantage of CARES money. However, with CARES 2.0 still in talks, it will need to plan for a self-managed future.

United Airlines aircraft parked
How is United keeping up with the cost of low demand? Photo: Getty Images

The airline could furlough up to 2,850 staff on October 1st. That’s according to an internal memo seen by Simple Flying. The move not only aligns with United’s scheduled capacity but will also save it money.

Further cuts have also been made to United’s catering service. With a limited variety of snacks and soft drinks, it would appear the airline is doing all it can to cut costs. But for how much longer will it be able to sustain itself in this way?

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